Oracle Still Likely To Get A BEA In Its Bonnet

Oracle ’s offer for BEA Systems has officially expired, but that probably isn't the end of the affair.

On Monday, shares of BEA Systems rose 0.9%, or 14 cents, to $16.64, in early-morning trading, while Larry Ellison Larry Ellison 's Oracle rose 0.6%, or 13 cents, to $21.48. The advance in BEA indicates investors have not given up hope that the company will be acquired; its shares traded around $14 before the Oracle bid.

Oracle let its $17-per-share offer, made earlier this month (See "Oracle Keeps Its Cool"), for the San Jose, Calif.-based business-software company expire on Sunday. BEA has called the offer "unacceptable," but says it would be amenable to an offer of $21 per share.

Oracle said Sunday that BEA shareholders should not assume it will renew its offer.

Despite BEA’s rejection of Oracle’s initial offer, worth $6.7 billion, Lehman Brothers analyst Israel Hernandez said a deal is still likely.

BEA has been playing hard to get. (See "Oracle and BEA: On The Outs" and "BEA: Investors Aren't Buying It") In a report, Hernandez said Oracle’s offer is a fair starting point, given what he called BEA Systems’ weak fundamentals and poor execution. "In our view, the eventual acquisition of BEA by Oracle is not an 'if,' but a 'when' and at 'what price,'" Hernandez wrote in a client note.

Hernandez, who has an "Overweight" rating on BEA, said another bidder is unlikely to emerge, especially because three weeks have passed since Oracle's unsolicited offer. Hernandez said Oracle's offer is "attractive and generous" and said it's unlikely that another bidder will be willing to pay more than that.

Monday also brought BEA’s formal response to a letter from Carl Icahn Carl Icahn , saying it was not opposed to a sale and was prepared to sell at $21 share.

Billionaire Icahn, who owns a 13.2% stake in BEA Systems, has called for a sale of the company and accused BEA Systems' board of trying to stop a potential sale.

On Friday, Icahn sent a letter to BEA’s directors, criticizing the company and threatening to instigate a proxy battle for control of the software maker if it did not being an auction process to sell itself.

Hernandez said that if BEA Systems remained a standalone company, its stock could be expected to shares fall over time because of strong competition and inconsistent execution. BEA Systems faces challenges from the growth of open-source software and as well as competition from Oracle and International Business Machines .

BEA,makes software that supports business processes like billing, supply chain management and securities trading. It does this by communicating between those programs and back-end systems, such as Oracle's database programs. Oracle has been on a buying spree in recent months, buying makers of software that helps organizations run large swaths of their businesses as it seeks to add high-margin business to its database core.